Investment Scam Red Flags

If you encounter any of these scammers, promptly disconnect or delete the communication, and report the their details to the Australian Securities and Investments Commission (ASIC).

Investment scams come in three main forms: completely fake offers, deceptive diversion of funds from real investments, and false representation of well-known companies. Regardless of the type, the money invested ends up in the scammer's account and is challenging to recover, especially if the scammer is based overseas. These scams can be difficult to detect as they often appear genuine, with convincing websites and impersonations of legitimate companies.

Scammers employ various tactics to lure individuals into investment schemes. They may use unexpected contact methods, such as phone calls or messages, fake investment trading platforms, bogus comparison websites, and even dating apps. These scams often promise unrealistic high returns, guaranteed benefits, or low-risk opportunities. Scammers exploit current investment trends, using popular terms and well-known company names to appear credible and entice victims.

To identify an investment scam, be vigilant for these warning signs: the absence of an Australian financial services (AFS) license or claims that it's unnecessary, persistent and high-pressure communication, name-dropping reputable organizations for credibility, unregistered investment prospectuses with ASIC, and promises of exceptionally high investment returns.

Investment scammers employ various tactics, including operating from overseas where they are difficult to prosecute, convincing victims not to withdraw their investments through coercion or false promises, and conducting 'pump and dump' schemes by manipulating share prices through fake news and then profiting by selling their shares, ultimately leaving other investors with losses.

To verify the authenticity of an investment opportunity, take the following steps:

1. Ask Questions and Request Information:
- Inquire about the person's identity and the representing company.
- Verify the company's ownership.
- Check if the company possesses an AFS license and its corresponding license number.
- Request the company's address.
- Confirm if their investment prospectus is registered with ASIC.
- If they evade answering these questions, it's likely a scam. Discontinue communication and block them if necessary.

2. Conduct Independent Research:
- Do not solely rely on the information provided by the person offering the investment.
- Verify their claims through independent sources.
- Avoid succumbing to pressure for quick decisions.
- Investigate further:
- Check ASIC's OFFERlist database for disclosure documents if the investment involves shares or interests in a managed investment scheme.
- Cross-reference address and contact details with publicly listed phone directories.
- Consult ASIC Connect's professional registers to confirm the company's AFS license or Australian credit license, ensuring it matches ASIC's records.
- Review ASIC's list of companies to avoid.
- Consult the International Organization of Securities Commission's (IOSCO) investor alerts to ensure the company isn't listed.
- Verify if the investment offer mentions any entities listed on ASIC's fake regulators and exchanges list.

To minimize the risk of falling victim to investment scams, follow these guidelines:

1. Protect Yourself:
- Conduct thorough checks to verify the legitimacy of any investment opportunity.
- Employ basic precautions to safeguard against identity theft.
- Keep your social media privacy settings up to date.

2. Exercise Caution:
- Exercise caution when encountering unexpected contact, especially if you've previously engaged with something on a website or social media platform.
- Maintain skepticism towards investment offers initiated via social media, as the identity of the sender may be dubious.
- Seek independent financial advice before committing to any investment.

3. In Case of Suspected Scam:
- If you suspect you've been targeted by scammers, act promptly.
- Refer to the "What to do if you've been scammed" guidelines for steps to take and appropriate reporting channels.

Source: https://moneysmart.gov.au/investment-warnings/investment-scams